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Jim Rickards

Jim has said all along that $6 0 per barrel is the number the Saudis calculated that’s low enough to put the frackers out of business, but high enough not to hurt themselves more than they have to.

Markets are a blunt instrument so you’re not going to stick the landing right at $60, and on the way down from $100 per barrel it overshot down to $45.

Oil will stay in a range from $50 to $60 for perhaps a year and a half or two years, because that’s how long it will take to put the frackers out of business.

Right now the frackers are increasing production because they’re desperate for the cash flow.

But they’re certainly not going to be drilling new wells or ordering new equipment, and it will take a while for all of that to be either depleted or shut in.

Think of $60 as a ceiling and $50 as a floor.

Oil will trade in a range between $50 – $60, but the important thing for inflation indices, Federal Reserve policy and the frackers is that it’s going to stay in that range, and it’s not going to go back up to $80 or $90 unless there’s a geopolitical shock.

If there’s a geopolitical shock or war in the Middle East then all bets are off.

There are trillions of dollars of debt that have already been issued based on oil prices of $130 per barrel.

There might be bargain hunting at these distressed prices, where shares are bought at pennies on the dollar, but that doesn’t mean that oil prices are going to go up a lot. It just means that they’re getting good entry points.

RUSSIA

It’s speculative to be bullish on Russia, but the ruble is close to a bottom and sanctions haven’t worked.

They’ve worked to inflict damage on the Russian economy, but they have not worked to change Putin’s behaviour.

Putin is not an economic player — he’s a political player.

He’s a geopolitical player.

Putin wants Georgia, he wants Ukraine, he wants Moldavia. He wants other territories and he’s willing to pay a price to get them — to that extent sanctions have failed.

At some point the choice to the US is “Do you keep slapping sanctions on?”, “Do you go to a kinetic war?” We’re already in a financial war, but do they go to a kinetic war? A kinetic war would be foolhardy and is very unlikely.

At the end of the day Putin wins.

Russia is the eighth largest economy in the world and the first or second largest energy exporter.

Plus they have a massive population. They have a lot of problems but when the stock prices and the currency get low enough it becomes a good entry point.